The court held that input services for setting up and modernizing a factory qualify for Cenvat credit, as they are deemed essential for manufacturing processes under the Cenvat Credit Rules.

Order : [Per Shri Ashok Jindal]

The appellant is in appeal against the impugned order.

2. The facts of the case are that the appellant is engaged in the manufacture of various excisable goods falling under Chapter 72 of the Central Excise Tariff Act, 1985 such as Wire Rods, TMT Bars, Angles, Rounds, and other variants of Wire Rod and TMT Bars. In addition to it, the Appellant also clears various scrap materials (after payment of excise duty) which are generated during the course

3. The Appellant acquired a steel plant at Patratu based on the order of the Hon‟ble High Court of Jharkhand in 2007, which was earlier a sick unit of Bihar Alloy Steel Limited („BASL‟). When the Appellant acquired the plant, they initially carried out the manufacturing activities with the old plant but soon it was felt that the old machineries in the plant were not viable for manufacturing and hence modernization was undertaken. Such factory had various divisions such as Wire Rod Mill, Bar Mill, Rebar Service Centre, Utility division, Fly Ash & Paver Bricks, Cooling Pond and Pig Iron Plant.

4. To carry out the erection, commissioning and installation of the capital goods for the purpose of modernization of the integrated steel plant, the Appellant received various „input services‟. Further, toundertake the manufacturing activity, the Appellant received various input services. Some portion of the expansion project did not eventually materialize, however, the credit on input/ input services in relation thereto was availed being in relation to the business of manufacturing. The Appellant availed the Cenvat Credit of duties and taxes paid thereon on such input services in accordance with the Cenvat Credit Rules, 2004 („Cenvat Credit Rules’) and duly reflected such availment in the books of accounts as well as the periodic excise returns filed during the underlying period.

5. In this regard, the Appellant‟s records were subjected to an audit for the period from January 2010 to March 2011 basis which an Audit Report dated 23.01.2012 was issued wherein it was observed that most of the input services being availed by the Appellant do not qualify as input services in terms of Rule 2(l) of the Cenvat Credit Rules. The Appellant duly substantiated the eligibility to avail such Cenvat credit on input services vide letter 16.03.2012. Subsequently, multiple correspondences took place, and the Appellant timely submitted all the documents that were sought by the Department including the invoices and work orders for the services on which Cenvat credit was availed.

6. In pursuance to such investigation, the Department issued the following underlying Show Cause Notices, covering various periods –

7. The Department vide the underlying SCNs, sought to deny the Cenvat credit of Rs. 39,43,40,451/- availed on the input services basis the allegation that such services utilized were not in relation to the manufacture of final dutiable goods, and the same were used in setting up of the factory, which is not eligible for availing credit. Further, it is pertinent to note that with respect to the amount of Rs. 3,59,96,247/-, in the first underlying SCN dated 06.08.2014, there is neither any allegations nor any findings in the impugned order as to the reason for denial of such Cenvat Credit.

8. In response thereto, the Appellant filed replies to each of the underlying SCNs, to substantiate the eligibility of Cenvat Credit on the underlying input services. Vide such replies, it was submitted tha